The ACA or Affordable Care Act is a law that has changed how the healthcare system, especially health insurance processes, in the United States works. Commonly, it is referred to as Obamacare. It has received nonstop criticisms ever since it was deployed in 2010. And US citizens have been equally happy and disappointed with it.
Primarily, President Barack Obama enacted this reform to ease the burden of healthcare costs to regular people. But what about small business owners? What do they have to say about the ACA? What good does Obamacare offer to business operators?
The term “small business” will be defined first before you get to read about the benefits of the ACA. According to the Small Business Association, a small business is a company that operates with less than 25 full-time employees (or equivalent — see FTE**) that earn $51,000 annually in average. The average annual wage limit might change depending on the current inflation rate.
Two of the major benefits of Obamacare to small business owners are tax credits and tax breaks. Both are designed to lower the burden of providing medical benefits to small business employees and allow them to become freer when it comes to getting business insurance quotes.
The amount of tax credits and breaks a small business operator will receive depends on the number of FTEs he has and the amount of average annual salaries he gives. More information can be found on the IRS website. But in simpler terms, the smaller the business, the greater the benefits. The maximum credit the operator might receive is 50% of the premiums he pays for.
The tax credits are retroactive (since the Obamacare was signed and enacted). Operators can get the help of an agent for faster processing, or just manually do the IRS forms. However, since last year, small business owners cannot claim credits for two consecutive years.
Take note that in order to be eligible for these two benefits, the employer must be paying half or more than half the amount of his employees’ health care plans. Also, you must get the plans or business insurance quotes from SHOP (Small Business Healthcare Options Program) Marketplace. As of this writing, employers who are not enrolled in the SHOP Marketplace might need to wait next year since the registration is already closed.
Being an eligible member of the SHOP Marketplace is already a benefit of its own. With premiums from SHOP, small business operators have full control of the amount that they will pay for their employees’ healthcare plans. And in November 15, 2015, businesses with 100 or less employees will become eligible for membership in the SHOP Marketplace.
Also, being a small business owner (or an employer with less than 50 employees), you will be exempted from the penalties that Obamacare imposes, which is known as Employer Shared Responsibility Payment or ESRP.
Do note that the government considers companies with more than 50 full-time employees as “large businesses” and the penalties only apply to operators that do not provide affordable coverage. The amount of the planned penalty mandate, which was delayed, is around $2,000 up to $3,000 per full-time employee. This penalty is only good for a month. If the large business, that did not comply with the Employer Shared Responsibility Payment, fails to take action for a year, it will need to pay $24,000 up to $36,000 per full-time equivalent employee.
Small businesses that have recently expanded will experience lesser burdens of the Employer Shared Responsibility Payment fees. The first 30 full-time equivalent employees that are covered by the employer will be exempted from the penalty. If the employer has 75 employees without coverage, the employer only needs to pay penalties for 45 of them.
Aside from being exempted from the ESRP, small businesses are exempted from the healthcare mandate that will force businesses with more than 100 employees to provide 70% of their employees with premiums. The mandate will become stricter next year. The government will raise the percentage to 95% in 2016.
In a nutshell, ACA or Obamacare is beneficial to small businesses by lessening the burden of providing medical healthcare benefits to their employees, ensuring all employees are covered, and saving them indirectly from penalizations.
**FTE: A Full Time Equivalent Employee is an employee or group of employees that have work hours equivalent to a regular full-time employee. For example, two half-time employees are equivalent to one full-time equivalent employee.
The image above provided by Steve Jurvetson, found at this link, from Flickr Creative Commons, is licensed under Creative Commons Attribution license. Some rights reserved. https://creativecommons.org/licenses/by/2.0/
